Suze Orman TwitterSuze Orman FacebookSuze Orman YouTubeSuze Orman LinkedIn
View Blog & News List

How to Decide if You Should Loan Someone Money

December 10, 2015 at 12:00 AM

One of the trickiest money issues you will ever have to navigate is when someone you love comes and asks you for a loan. Or if you see someone you love is having a tough time financially and you want to loan them money to help.

What I too often see is that incredibly caring and thoughtful people are blinded by their desire to help, and don’t carefully consider the ramifications of making a loan: for themselves and the recipient. That can just lead to heartache and bigger financial problems.

Before you offer a loan to anyone, make sure you can pass my 3-step Loan Test.

  1. Will a loan really help this person? Do they need a loan because of some unforeseeable problem—a health issue, a layoffor because they have made bad decisions with money and have a big hole to dig out of? If it’s the latter, I don’t think loaning that person money is necessarily going to help. Oh sure, your money might help them pay off some pressing bill, but if they don’t respect money, you and I both know they will likely just fall into more money trouble. Before you ever loan money to someone who has made bad decisions in the past, you need to be assured that they have begun to take the steps to becoming responsible with money. 
  2. Can you honestly afford to help? You are to never ever reduce your emergency savings to the point that it puts your own financial security at risk. You know that I think it is smart to always have eight months of living expenses set aside in an emergency fund. Any loan that reduces your emergency fund below the eight-month threshold is not respectful to yourself. Please don’t do it.
  3. Are you comfortable thinking about the money as a gift, not a loan? I believe all loans should be repaid. That’s how the borrower shows their respect. But from a financial standpoint, if you honestly need the money to be repaid by a certain date, I would question whether you should make the loan.

    When you give money to someone you love, I don’t have to tell you how high the emotional stakes are. Adding a layer of financial stress is dangerous. Think about the “what if” factor. What if the loan isn’t repaid? Not only is that a financial hit, but it likely will put a tremendous strain on a relationship with someone you love. You could be out the money, and on the outs with someone very important to you.

    A good test for you is to ask yourself if you would be okayemotionally and financiallyif the loan was actually a gift that was never repaid. Be honest with yourself.

Tag Cloud

borrow each year, capitalization is going to pile up college studentno tax on withdrawlsbe good examplehigh credit score discountOne Wallet At A TimeGiftconfident401(k) Contributionsstaycationmarriage financial responsibility6 month waiting periodrolloverWarner Bros Television Groupis it true? Commencementprescription tierARM Caution2016 adjust estimated taxhealthy teethstretch out haircut appointmentsdo not pay allowance for good behaviorBankruptcycontribution retirement accountsreduce interest rateritual scheduleworkaholiccost of capitalization calculatorcar buying mistakesloan no longer than 36monthsterm insurancepay off debtvalentines dayphysical healthloan big picture 40% toward financial goalCommunication Skills provider of financial supporthigh down paymentno interestFinancial Educatorwomen live longercommitreduce withholdinghome ownershipUniversity of Illinoisinterest on student loanssuitableMass MutualFinancialFinancial Cliffemployer offered life insuranceultimate compounding giftFICO credit score credit card mortgagechildren's bookfinancial argumentsfinancial goal phrasevalue moneyalways use all paid time offSuze changed my lifeget over life insurance phobiabuying car 2016buy homefinancial independencerepay student loansignore 6 month grace period bad decisionssame sex marriage band end FloridaVital Documentshigh FICO scoreraise your deductibledon't defer interest paymentslower rateemployer funding HSAadvice for college graduatesdebtsavings pleasurefocus on needsGraceAccuQuote.comCivil Rights2015 financial roadmaprequire chore in exchange for allowancewould you decline a bonusburn outpublic service loan forgiveness programcompare monthly expensesbecome member US Tax Codedoctors in networkInvest for savings growthpresident Obamadebt freeARMuniversal college accessHoliday Shoppingconsider roth 401(k)family save at least $100 monthlyclosing costs 2% of loanpay more than minimumnot gender specific graduationUrbana-ChampaignAmy Lacyetlife insurance name trust as beneficiarydental insurance mobile appautomatic paymentThe Suze Orman Showdepreciating asset Emergency SavingsPrime Rate IncreasePay Off Debt Before RetirementAuto Savings successmax employer matched 401(k) contributionstrained relationshipsavingsdon't charge a pennyLTCoverspend on dining out20 to 25 times annual incomecredit utilization ratejuggle multiple financial goalsbig results earn more on savingsHDHP'sbudgetmortgageno late fee death benefit 20 to 25 times annual incomestandard rateraise deductiblesretain separate credit cardsLoveco-sign Suze Ormanlow mileage discountfederal student loan deferment overcome financial fearsearn allowanceverify retirement plan with HR or plan sponsoronly offered while employed Roth 401(k)home insurancefinancing car Adequate Auto and Home InsuranceInfluentialsno sneaking in fees3% debt transferred New York Lifeincrease retirement contribution ratemoney-aware childkids schedule paymentslong term careConventional loan PMIage appropriate choreGay Rightspeace of mindStock Investmentsanticipated salarycan you afford itcommunity bankInfluential Celebrityshorter payback periodclosing disclosurefile taxes quicklyincentives for health care wellness screeningprotect your familystandard deduction 20% down payment3 savings buckets home loan credit score below 740 zero rate transfer dealsnear historic lowsbest interest of investor2016 adjust withholdingnon conventional routeaffordable premiumgift up to 14,000buying a carcut monthly cable billsetup automatic savings withdrawETF's20 year level term pay 100% cashHDHP's are not badtake actioncredit managementbuy down refinanceterm life insurancepurely financial standpointHDHP be true to yourselfheartachemonthly dental insurance premiumLong Term Care Insurance television hostHDHP's are good for youraise insurance deductible50 over 50TelepicturesLifestyleFRAincrease retirement savingsdon't extend mortgage back-to-school budgetPost-Divorcefour steps to retirement savings don't spend property taxpay high rate off firstbetter termslower interest ratesave moneypay credit debt ASAPStudent Debt Crisisengaged in financesgay marriage ban end Florida verify wellness screening and programsHSA tax savingsderailed planteach your child good money habitspermanent life insurancechildren under 18no negativitytitle insurancecredit reportsmall changes Swap Older Annuities or Life Insurance BeautyYoung Adult holiday spendingis it necessary?one credit cardback door Roth IRA!00% tuition paidhigher insurance deductibleStaffords this year have a fixed 6.8% interest rateInflation Benefitstore credit cardsFederal PLUS loanborrowing plan Ashley SpringerDurable Power of Attorney for Health Caresocial security not going brokepaid vacationlowest cost fund optionkid borrow firstsave max employee matchCD'sdebit cardno retirement funds for down paymentgrandchild summer job IRA contributionpaying for collegeraising interest ratesopen enrollment review teach importance of helping othersinsurance yearly reviewclosing feespercentage men widowed 75-84Wall StreetGiftsdon't buy wantsCredit Card Rate IncreaseplanLegal GuardianFundsescrowpay interest while in schoolmoney vowslow down payment8 month emergency fundCollege of Veterinary MedicineDeath Benefitwives should be involved in retirementstudent loan debtCory Bookercreate new truthunexpected expensebest interest ratesdangerous retirement planSuze Orman's Money Warsretirment savingsraising mortgage rates identity theftpreexisting condition not coveredno life insurance financially irresponsibleface your financial fearMust Have Documentsaffordabilitypay down student loan debtfiduciaryFinancial Systemitemized deductionSchool of Social WorkFinancial Solutions For You8 month safety netis it necessary30 year mortgage approved medical 100% tax-freebuy home you can affordwrite new goaldon't blow tax refundsummer job match income Combo Insurance Productsiffy incomefinancial fearsMoney-SavingpositiveAlarm Clockcollege graduatehigher monthly paymentwomen long term careno waiting periodRevocable Trustreal estate mistakesalternative FICO scoreSuze Orman spouse Kathy Travishealthy youCOLAlearn good financial choicesmortgage disclosuretraditional vs roth 401(k)student loan repayment planmultiple lendershome related tax break bonus age appropriate goalsletter to suzelive below your meansworst financial mistake4 Must Have Documents Satisfyingcouple financescharges on credit cardresponsiblereal estate market15-year refinance dealhousing marketschool breakdown projected monthly housing costhealthy aging keep a scheduleWillinterest capitalizationget health insuranceRichsocial workCNBCCPI-Wspeak new goalpowerfulCiti Simplicity Card same-sex marriageshop online guaranteed level term policyHigh FICO Score = Better Rateloan necessitypercentage of women widowed 75-84replace permanent life insurance with termFinal GoodbyeSuze approvedbetter loan ratesstay positiveHolidaypaid in fullemergency fund savings3 step financial road mapcredit unionFederal Stafford loanpush yourself to save more for retirementtaxes20% equitycommissionsUniversity of FloridaChanging Livesroth iraallowance taskone annual feeFederal Funds Rate10 year repayment plan 8 Rulesdental savings plandear suzebe kind to yourselfget the most out of social security unsubsidized Stafford loantax refund fraudwomen outlive menWashingtonswitch to roth 401(k)FICO at least 720is it kind?Retirement Incomeinsurance mistakeat worst still pay 75% benefitresponsible with moneyoverspend on giftsstudent loan repayment estimatornew carHoliday Seasonexercise reguarlyHeartjanuary billsgift not loanbest loan deal automatic withdraw to savings don't derail retirement savingsdon't use allowance as briberequired disclosureGoodbyeSelfishwaive home inspection bidcontribute household expenses 20% down payment avoid feesLong Term Care shoppingcar loanprotect dependent teens and moneyfocus on new truth Fiscal Responsibilitygrandparent IRA contribution Interestpay down car loanincrease emergency savingscostly legal get credit cardleave a legacydental discount planGay Couplesthree year car loancompare provider pricingdangerous money seasondon't cover cosmetic dentistryLTCi ASAPreferrals SelectQuote.comlife insuranceRetirement Savingshealthy retirement weightbalance transfer secure creditcomparison shoppingPhyllis Shelton expert long-term caredon't do five year car loancommunity collegedeath benefit needs for familyRevocable Living Trustenjoy saving Veterinary SchoolPrime Rate Rise 2015cnbc alarm clockhealthy gums10% donate to charitySpendingemergency fund identity fraudfinancial concerncalculate dependents annual income needspoint cost offset by savingsIRA contribution gifted moneyannual cost of living adjustmenthighest possible benefitEric Dodge quick closingretirementHDHP/HSA15 year mortgagehealthy retirement blood pressuremortgage interest tax deductionsidelinedprotect and provide for minor child no private loansForbesExhibitionBill and Pennymax benefit covered740 credit scoreprofessional advisorsocial security never insolventStudent Debtlousy investmentunder 18 financial gifthigh deductible health care planbad retirement planninglow-cost index mutual fundAmericans don't use all paid vacation timeknow before you owemortgage brokerFHA loan feesCredit scoreOverspendingloan is giftschedule vacationlower premiummarriage inequalitylower overall drug costfile asaplong-term care maintain standard of livingmake saving a pleasure19 years cash flow problemdoctor no longer in networkstudentForbes Top 10emotional stakesdon't ignore open enrollmentHigh Credit Scorewomen longer life spanpublic service career student loan repayment 2017 Taxeshome buying seasonno apologyhigh premiumsshort term goal Federal Reserveallowanceorigination feesLong Term Care premiumsprotect loved ones automate student loan paymentsno private loanSuze Orman Scholarshipreduce monthly paymentonly refinance if it payslow credit scoreFinancial Awarenessyours, mine & oursSandy Hook Promisebetter loan dealslong term goalmental healthFinancial AdviceHow To Build CreditMoneyavoid burn outEmployer Matched Contributionadjust allocations switch to spouse coveragedream schooladd teencut monthly cellular billAARP Social security calculatorhome buying budgetdo you need life insuranceoverspend on nights outnot enough life insuranceLTC shoppingincreased auto insurance premiummonthly benefit full retirement ageMarlo Thomastoo expensive schoolSuze is my biggest mentormeet monthly secured cardgift grandchild IRA contributionMost Influential Celebrities ListJose RodriguezFree Debt EliminatorSandy Hook Elementary Schoollong-term care premiumstax ID theftAARPeliminate credit card debtFinancial Awareness Video Festivalno fee transferBaby Boomersrising home pricesMotherbill paying prioritiesMoney MarketFinancial Gift Cliffsocial securityfinancial aidadult childreninitial tax break 3 bucket approachrent vs buyForeclosureaccelerate dental workhome buying mistakescredit cardretirement planteenscostly insurance mistakecar leasingfraudulent returnPersonal FinancepremiumMortgage Credit Availability Indexmanage student loansinsuranceBankSave Us Moneystudent loan repaymentspring summer Easy Life Insurance loved ones dependent on income2015 record year car saleslet them have 50% controllower mortgage interesthome budget after tax costCredit Card Interest RateFixed Rate Mortgage401Kno splurge Newtownnegotiate points with bank or sellereight month living expense refundPBS SpecialStudent LoanFICO ScoreMinor Children special saving accountNew american Dream TeachFinancial Power of Attorneyconfident of solution

View Blog & News List
People First. Then Money. Then Things.
Connect with me on Facebook Connect with me on YouTube Connect with me on Twitter
© 2017 Suze Orman Media Inc. All rights reserved.
 |  Search  |  Sitemap  |  Privacy  |  Terms
Sign Up For E-mail Offers
Open Panel
Close Panel